HS Engineering – Overview
HS Engineering was started around 100 years ago as a small family engineering business in Leeds, making engineering tools. Harry Smith (the current CEO) joined his father and uncle in the organisation around 40 years ago when the company began to specialise in the manufacture of bearings.
Over time the organisation and family involvement has grown. The board was made up of mainly family members until last 7 years, when the company was experiencing double digit growth and outside expertise was brought in (see separate organisation structure).
The organisation operates in two markets:
o Low end product to general and automotive industries (Leeds / Wolverhampton operations) – 2/3rd of sales mix – technology able to generate higher volumes through automation
o Precision (high quality) to aerospace market (Oldham) – 1/3 of sales mix “ high profit margin, high skilled labour required.
Location of markets:
o 50% home market, some automotive / aerospace, higher proportion of general industry
o 50% overseas, Europe esp France (aerospace), USA (automotive) and Russia (general industry)
o Anticipated that the market is changing with 20% of market in Europe, a similar level in USA/Russia and the remaining market expanding into the Far East.
The general loss of manufacturing in the UK and the rise in cheaper products from the Far East has had a significant negative impact on the profitability of the firm. Simply put, many automotive manufacturers closed in UK and generally manufacturing industry has seen a decline. The aerospace industry is however steady, even buoyant in some cases.
The company currently has a Â£150m turnover with Â£5m net profit to June this year. Results for the next financial year are not yet available but there is expected to be a 30% reduction in Turnover to Â£110m and Â£2m profit.
Overall the company culture varies across the sites “ they all have their different needs and approaches to work (see site information to follow).
Currently the organisation operates across three locations:
This site produced mass manufactured bearings for general industry. The site is a traditional manufacturing environment, heavily unionised. The benefits (sickness schemes, loyalty bonus and pensions) and wage rates have traditionally been very good compared to the local market and whole families work at the organisation. The structure comprises:
each area of production has a team leader
team leaders reports to a unit supervisor
the unit supervisor reports to the shift leader
the shift leader reports to the head of production
the head of production reports to the production director
the production director reports to the MD
the MD makes all operational decisions, but reports to the part-time CEO on major issues / strategic decisions.
Head office operations are currently located in Leeds.
Staff are loyal and have been with the company a long time. There is a strong family feel to the Leeds operations as a number of key posts are filled by members of Harry s family. This breadth of family relationships can sometimes create tensions between operations.
The Wolverhampton site has been in existence for around 25 years. This second site was established in the West Midlands to supply high volume engineering bearings to the car industry (hence the choice of location).
Wolverhampton has seen considerable investment in machinery, to secure the high volume required to make operations cost effective. This has led to a reduction in the staffed workforce, and more reliance on the use of temporary labour to cope with peaks in demand. There is little loyalty to the organisation, given redundancies that took place around 8 years ago following the introduction of the new equipment.
Due to the needs to cope with the fluctuation in labour, and the unionised environment (there were calls for strike action during the redundancies), the Wolverhampton site has a small HR team that reports into HR in Leeds.
This site was established around 7 years ago. Oldham was chosen as it provided tax incentives to new industries moving into the area, was close to BAe to whom it supplied aero-engine parts, and was able to provide the clean manufacturing environment required that the older building at Leeds were unable to accomplish without significant investment in re-building. Additionally it is within 30 miles of Leeds and on major routes to the Wolverhampton.
The Oldham operation is significantly different from other HS engineering operations. There is no formal union recognition at this site. From the very beginning it adopted a cellular manufacturing approach, where teams are fully accountable for their production, and report directly to their shift manager, who reports to the factory manager.
Wage rates are rather lower than at other sites, however, given the bonus and incentive schemes that operated within the cellular manufacturing process, the operational staff have earned good money compared to local workers. However, office and support staff are less generously rewarded than at other sites.
Given the issue with current profitability and the long term future of the organisation urgent cost control actions are needed.
The decision has been taken to close two plants (Wolverhampton and Oldham). Leeds will take over precision manufacturing (as it is felt by some family members that the organisation needs to return to its roots in Leeds). It has been decided that the non-precision work (of Leeds and Wolverhampton) will in future be manufactured in Malaysia, where the cost of labour is much cheaper, and access to new markets much easier.
Research and development and marketing have suggested an expansion into clinical/medical precision engineering “ however the Sales Director believes that this is a step too far in the change and has used family influences to stall decision making in this area.
The previous Finance Director resigned because he was not happy with these decisions. A new Interim Finance Director (Helen Lumb) has been appointed to oversee the project from the Finance and Human Resources point of view.
Evaluate and make recommendations to address the issues that could arise as a result of the significant change project outlined in the HS Engineering brief.
Specifically you need to think about the following:
o How the organisation will need to adapt for the future? In particular consider issues related to communication.
o The experiences of other (similar) organisations undergoing restructuring and relocation of operations overseas
o Evaluation criteria:
Your contribution to evaluate holistically and will comprise the following criteria:
o Clear identification of the issues that HS engineering face in Communication
o What barriers to effective communication currently exist within UK operations?
o What could be done to help the new UK centre of operations communicate effectively across its UK operation?
o It seems that a lot of communication is happening off the grid within family discussions “ what could be done to make communication more open within the organisation?
o It seems that historically the organisation has been rather paternal, and hasn t shared concerns around profit / stability until it has become an urgent matter to consider. At the moment the organisation has not declared its decreasing profit forecasts to the workers (nor consideration of closing and relocating operations) “ is protecting them like this a good idea?
o What sort of communication issues do you anticipate between the UK and new international operations? (language, time difference, the existence of the owner overseas) What action could the company put in place (perhaps based on the experience of other organisations) to help limit any negative impact it might have?
o What communications technology do you anticipate us needing moving forward if we are to make this transition a success?
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